Do spousal IRA contributions reduce AGI for FAFSA calculations? 2025-2026 confusion

my tax guy said ira contributions don't count for fafsa but idk if that's true for the new simplified fafsa or just the old one

The 2025-2026 FAFSA uses your 2023 tax return information, but the formulas changed dramatically. Traditional IRA contributions DO reduce your AGI for both tax and FAFSA purposes under the new system. The key is that they're already removed from your AGI on your tax return, so they're automatically excluded from FAFSA calculations. What doesn't get added back anymore are the retirement plan contributions from your husband's paycheck (as you noted). The new FAFSA doesn't have the asset protection allowance questions or worksheet adjustments that used to potentially add some retirement contributions back in. If maximizing aid eligibility is your goal, making that spousal IRA contribution before April 15 is definitely smart since it reduces your 2023 AGI - which is what the 2025-2026 FAFSA will use for your daughter's first year of college.

I literally spent 2 hours on hold with FSA trying to get this EXACT question answered last week!!! The system is SO frustrating. Since no one could help me, I ended up making my IRA contribution anyway because at least I knew it would help with taxes. The financial aid system is impossible to navigate without insider knowledge. If anyone needs to actually TALK to a real person at Federal Student Aid, I finally found a service called Claimyr that got me through after weeks of failed attempts. You can see how it works at https://youtu.be/TbC8dZQWYNQ and their site is claimyr.com - they connected me in about 15 minutes when I was about to give up. The FSA rep gave me tons of info that wasn't on their website.

Y'all are overthinking this. Just do ur ira contribution for the tax break. The fafsa is gonna use whatever AGI is on ur tax form anyway so if it lowers that then ur good either way

I went through this last year with my son starting college, and I regret not making that IRA contribution. I had the same question and ended up just skipping it because I couldn't get a clear answer. Then I found out later it WOULD have helped with our FAFSA calculation. Now I'm paying more for his freshman year than I needed to. Don't make my mistake!!! The new FAFSA is supposed to be "simplified" but they've done a terrible job explaining how different retirement accounts are treated. MAKE THE CONTRIBUTION!

There's significant misinformation in this thread that needs correction: 1. The 2025-2026 FAFSA will use your 2023 federal tax return data (for students starting Fall 2025) 2. Traditional IRA contributions DO reduce AGI for both tax and FAFSA purposes 3. The new Student Aid Index (SAI) calculation doesn't add these back in like the old FAFSA methodology sometimes did 4. However, be aware that IRA contributions have their own deadline (April 15, 2024 for 2023 tax year) that cannot be extended even if you extend your tax return filing 5. The contribution limits are $6,500 for 2023 ($7,500 if over 50) For maximum impact on both taxes and FAFSA, make your contribution before April 15th. This affects your 2023 tax return which feeds directly into the 2025-2026 FAFSA calculations.

my daughters on her 3rd year in college and honestly the whole financial aid thing is such a nightmare i gave up trying to optimize anything. some years we got more aid than others and i never could figure out why. good luck figuring it out better than i did lol

UPDATE: We made our spousal IRA contribution yesterday, right before the deadline! Thanks everyone for your help. I feel much better knowing this will help with both our taxes AND our FAFSA calculation for next year. One less thing to worry about as we navigate this college financial aid maze!

Congratulations on making that IRA contribution! As someone who's been through this process multiple times, I can tell you that every dollar you can legitimately reduce your AGI by will help with financial aid calculations. The new FAFSA formula is much more straightforward about this - if it lowers your AGI on your tax return, it helps with aid eligibility. You made the right call getting it done before the deadline. Best of luck with your daughter's college applications and the FAFSA process!

This is such a helpful thread! I'm in a similar situation with my son starting college in fall 2025, and I had the exact same confusion about IRA contributions and the new FAFSA. It's so frustrating that the official FSA resources don't clearly explain these changes. I'm glad you got your contribution in before the deadline - I need to double-check if we maximized ours for 2023 too. The fact that traditional IRA contributions now simply reduce your AGI for FAFSA purposes (without the complicated add-backs from the old system) makes this much more straightforward than I thought. Thanks for asking the question that so many of us needed answered!

This is exactly the kind of detailed discussion I was hoping to find! I'm also navigating the FAFSA for the first time with my daughter starting college in fall 2025, and the IRA contribution question has been keeping me up at night. Reading through everyone's experiences and the clarifications about how the new FAFSA formula actually works has been so helpful. It's clear that traditional IRA contributions do reduce your AGI for both tax and FAFSA purposes under the new system, which is a huge relief. I made my 2023 spousal IRA contribution last week after reading similar advice elsewhere, but I wasn't 100% confident it was the right move until seeing this thread. Thank you all for sharing your knowledge and experiences - it's made this confusing process feel much more manageable!

As someone who just went through this exact situation last month, I can confirm what others have said - traditional IRA contributions absolutely do reduce your AGI for the new FAFSA calculations! I was in the same boat trying to figure out if it was worth making our 2023 contribution before the deadline. After calling around and getting conflicting information, I finally found a financial aid advisor who explained that the new FAFSA formula is much simpler - they basically just take your AGI straight from your tax return without all those add-back worksheets from the old system. Since traditional IRA contributions lower your tax AGI, they automatically lower what FAFSA sees too. We ended up making the max contribution and I'm so glad we did. The peace of mind knowing it helps with both taxes AND financial aid was worth the scramble to get it done before April 15th. For anyone still on the fence about this, I'd definitely recommend making the contribution if you can afford it!